Thursday, May 4, 2017

Restructuring Predicted for iHeartMedia

“There’s going to be some kind of restructuring,’’ said Scott Van den Bosch, a senior credit officer at Moody’s Investors Service Inc. who follows the company. iHeartMedia is over-leveraged, he told The Boston Globe, and “That’s not sustainable. We don’t think the company can grow into this capital structure.”

“If you could get leverage down and reduce interest expenses, that could allow the company additional time to improve results,’’ Van den Bosch said.

It’s been nearly a decade since the buyout was completed, a deal that came together under duress as the credit markets already were showing signs of stress. That’s longer than Bain and Lee generally like to own companies they acquire. But soon after they got into the radio business, the economy, and the company, began to stumble.

Mark Fratrick, chief economist with the media research and consulting firm BIA/Kelsey, based in Chantilly, Va., said it’s easy to lament the halcyon days of radio, but station owners have had to face deep financial challenges. iHeart has been losing money for years.

Mark Fratrick

“You have this incredible competition for listeners as well as for advertisers,’’ Fratrick said. “You couple that with the recession. Those two forces were profound and were happening at the same time.”

Some analysts believe there’s a natural way to split the company, by selling its radio and billboard operations to different buyers. Such transactions could lead to gains for both stockholders and bondholders. But any exit plan, whether through a breakup or sale, can’t happen until the debt crunch gets sorted, analysts and people with knowledge of the company say.

The negotiations are complex, and investors are jockeying to be first in line to get their money under various scenarios.

George W. Tetler III, an attorney at Bowditch & Dewey in Worcester, who has worked on complex bankruptcy cases in the past, says the iHeart situation is unusual, mostly because of the way the financing was set up.

“There are innumerable layers of debt that have been part of this structure for quite a period of time,’’ Tetler said.